U.S. Adds 211,000 Jobs In April And Unemployment Rate Drops To 4.4%

A First Student Inc. recruiter wears a t-shirt with "Hiring School Bus Drivers" displayed on the back during a Job News USA career fair in Overland Park, Kansas, U.S., on Wednesday, March 8, 2017. Photographer: Luke Sharrett/Bloomberg

The employment recovery that began under President Barack Obama shows little sign of slowing down under his successor: new hiring data out Friday morning shows that the U.S. economy added jobs for the 79th consecutive month, and that the nation's unemployment rate has dropped to its lowest level in 10 years.

Employers in the U.S. added 211,000 non-farm jobs in April, the Bureau of Labor Statistics reported Friday. The unemployment rate ticked down to 4.4%, from 4.5%. The payroll result was well above the economist consensus, which had called for an addition of 185,000 non-farm jobs in April. The forecast had also called for the unemployment rate to tick up to 4.6%.

The month's growth was driven by job gains in leisure and hospitality, healthcare and social assistance, financial activities and mining, the BLS said. The leisure and hospitality sector added 55,000 jobs, 26,000 of which came from the food services sub-sector. Healthcare and social services added 37,000 jobs in April, with healthcare accounting for 20,000 of that total. The growth is in line with the industry's monthly job growth for the first quarter of 2017, the BLS noted, but lower than the 32,000 monthly average in 2016.

The much-discussed U-6 figure -- often referred to as the "real" unemployment rate because it measures the percent of total unemployed plus people who are marginally attached to the labor force or working part time for economic reasons -- dipped to 8.6%, down from 8.9% in March and 9.3% in April 2016.

The labor force participation rate, meanwhile, remained virtually unchanged at 62.9%. Steve Rick, chief economist at CUNA Mutual Group, said that the stagnation in this number isn't too concerning because a demographic shift (retiring Baby Boomers) is offsetting the economic growth, and higher participation in prior years was a largely demographic-driven event.

"If it can stay at 63% and not drop any lower, that’s fine," he said. "People say 'it was 67% 10 years ago,' but… during 90's and 2000's, it was abnormally high. You can’t really compare it because of the Baby Boomer effect. Baby Boomers were in their prime working age, and that artificially pushed the participation rate up above its long term average."

Rick and other economists generally agree that Friday's overall report indicates a healthy labor market, and are particularly encouraged by the drop in the number of people who have been forced to work part-time even though they want a full-time job.

"People working part time for economic reasons dropped by 281,000 -- from 5.5 million to 5.27 million. The idea is that people no longer needed to settle for a part-time job because business activity was strong," Josh Wright, chief economist of iCIMS, said in an interview Friday morning. "I think that means we’ve got a lot of momentum in the U.S. economy despite the fact that we had a weak first quarter GDP report."

Andrew Chamberlain, Glassdoor's chief economist, concurs.

"What this report says to me is that the labor market is still, I believe, one of the strongest in a generation," Chamberlain said in a phone interview Friday morning. "The growth from the previous administration has largely continued onward unchanged. By almost every measure the labor market is healthy today."

The "almost" hedge accounts for wage growth, which Chamberlain and others said could be stronger. While average hourly earnings rose by 0.3%, or 7 cents, to $26.19 in April, the year-over-year growth is only at 2.5%. Given the drop in the unemployment rate and the overall tightening of the labor market, economic observers say that year-over-year growth should be closer to 3%.

"Wages should be picking up as unemployment falls," Chamberlain said. "Considering how tight the labor markes are in many cities, we should see wages picking up to reflect that competition for talent."

As it does every month, the BLS revised its reports from the prior two months. On Friday, the agency said it was revising February's job growth up from 219,000 jobs added to 232,000 jobs added. March's 98,000 additions, however, were revised down to just 79,000. Taken together, job gains in February and March were 6,000-jobs lower than what was initially reported. Over the past three months, job gains have averaged 174,000 -- a figure, economists say, make it all but guaranteed that the Federal Reserve will raise interest rates during its June meeting.

The bigger question than the interest rate question, economists said, is how much lower the unemployment rate can go.

"No one knows for sure, and we're only going to know on the back end of it, once we get to the next recession," iCIMS economist Wright said. "Everything looks great now, but the question is are we getting a Goldilocks scenario? Or is this a modified repeat of what we saw in 2004 and 2005, and that 4.4%, 4.5% isn’t sustainble for the U.S. economy in 21st century?"